Tuesday 22 March 2011 15.08 EDT
First published on Tuesday 22 March 2011 15.08 EDT

The UK risks being a laggard in the race to build high-speed mobile internet unless operators drop legal threats over Britain's digital infrastructure, the communications regulator has warned.

Ed Richards, Ofcom's chief executive, on Tuesday outlined plans for its largest auction to date of mobile phone spectrum, with the aim of enabling high-speed wireless internet around the UK. The rights to "fourth generation" (4G) radio spectrum – which enables connections at speeds of up to 100Mbps, about 25 times faster than the average broadband connection now in use at home – will be auctioned in 2012.

The disposal will give access to 80% more radio spectrum than was sold in 2000, when the 3G spectrum was auctioned for £22bn. But the price is expected to be far lower this time because two of the incumbents, Vodafone and O2, have substantial amounts of radio spectrum.

Many Britons will have to wait until at least 2014 to enjoy the benefits of 4G mobile internet because of the time and expense involved in building the new systems. That could be further delayed if Everything Everywhere, the UK's largest mobile operator, formed by a merger of Orange and T-Mobile, goes ahead with a legal challenge to Ofcom's proposals.

"Do I wish that we hadn't had any dispute and debate and delay? Of course I do, but let's be realistic," Richards urged on Tuesday. "This is a massive debate of huge economic importance to a lot of very powerful companies and of huge importance to the country. We shouldn't be surprised or uncomfortable that there is a rigorous and thorough debate. This matters to people, it matters to companies, it matters to us, it matters to consumers."

Other countries including South Korea, Sweden, Denmark, the US, Russia, Germany, Kenya, Nepal and Australia either have 4G networks, or will develop them by the end of this year. But Richards said: "I don't accept we're laggards. But I think there is a danger if we don't move in a timely way that we become laggards. Others have already started moving now and we do not want to fall any further behind."

Two of the UK's mobile operators, 3 and Everything Everywhere, protested in January after Ofcom allowed the two older networks, O2 and Vodafone, to "re-farm" low-frequency spectrum that they had been allocated when the mobile networks were first set up in the 1980s for 3G connections. Low-frequency bandwidth around the 800MHz mark is highly sought after as it is more effective for connections over long distances such as in rural areas. The bandwidth is being released by the "digital switchover" from analogue to digital TV signals across the UK.

Tom Alexander, the chief executive of Everything Everywhere, said on Tuesday that while Ofcom's new proposals provide "partial solutions" to its complaints, "we are concerned that the proposals … do not significantly reduce the dominance" of Vodafone and O2, which own all of the low-frequency bandwidth below the 1GHz mark, giving them better coverage in rural areas. The company said it would outline its opposition to the plans to Ofcom, but would not go into further detail.

Kevin Russell, chief executive officer of 3 UK, said: "Ofcom's proposals set out the core principle that the UK must retain four wholesale mobile operators. Against a background of consolidation in the UK and US, we believe this is a clear and strong commitment from government and Ofcom that will stimulate investment in mobile broadband and protect UK consumers.

"The January 2011 reallocation of 2G spectrum has given a huge competitive advantage to Vodafone, O2 and Everything Everywhere. Ofcom's proposals seek to rebalance this in the medium term but there are still immediate distortions that need to be addressed. These include significant coverage, capacity and financial benefits."

Richards said: "I hope that all [operators] recognise that the UK needs to move on with this now and accept that a judgment's got to be made. What I hope doesn't happen is that the debate spills over into litigation because that will delay the award [of the spectrum after the auction] and then there is only one loser – the British consumer."

Why low frequency matters

Ofcom intends to auction off the radio spectrum for the next-generation 4G networks in pairs of bandwidth: some chunks below 1 gigahertz (1,000 megahertz) paired with others either at 1.8GHz or 2.6GHz. That's because to mobile operators both are desirable, but in different ways. The low-frequency spectrum gives excellent coverage across large distances, in the same way that a large swell travelling through the sea isn't diverted by breakwaters.

Vodafone and O2 were the original phone networks in the UK (when O2 was BT Cellnet), and so were allocated spectrum in the 900MHz band; later allocations were at higher frequencies. That's why customers of those two networks can get voice signals where Three, Orange and T-Mobile can't.

The high-frequency spectrum, meanwhile, allows really fast connections, but only over comparatively short distances – so in cities, where you want an intensive data connection, it would be ideal.

What 3 and Everything Everywhere (Orange/T-Mobile) find galling is that in January the government instructed Ofcom to hand over that 900MHz spectrum to Vodafone and O2 for free. The rivals think it should have either been auctioned, or at least paid for on the basis of its potentially huge value for reaching customers outside cities. That leaves them at a disadvantage to start with – and is part of the reason why this auction will not raise anything like the £22bn that the 3G one did, despite having more spectrum and, arguably, being more useful.